Customer Insight for Competitive Advantage - Coursework Example

Insight for Competitive Advantage Introduction In order to become successful, organisations have to look into the needs of their s.In fact, this point has been clearly proved by various scholars and various organisations. So, customer satisfaction, customer loyalty and customer retention are vital issues for organisations. Research has shown that customer satisfaction is linked to profitability. This work looks into the importance of offering customer satisfaction by analysing how customer satisfaction is linked to customer loyalty and retention. Importance of good customer experience In the opinion of Zairi (2000), the purpose of what businesses do is customers. So, it is not the customers who depend on the organisations but it is organisations who depend on customers. So, customers can never be considered as a source of problem because if customers go away, the future of the company will be in jeopardy (ibid). Similarly, in the opinion of Hanesmark and Albinsson (2004), customer satisfaction can be explained as the overall customer attitude towards a particular service provider, or the emotional reaction of a customer to the difference he or she notices between the anticipated service and the actual service. In fact, this customer satisfaction is related to various factors like customer loyalty and customer retention. To illustrate, according to Anderson and Jacobson (2000), customer loyalty is the situation when a customer maintains of increases the purchase from a particular organisation. In their opinion, this happens when an organisation manages to create a benefit for a customer. In fact, a customer feels to be loyal to a particular organisation when the company manages to offer such services which are according to the expectations of the customer. Similarly, Hoyer and MacInnis (2001) claim that customer retention is the act of working to satisfy customers with the intention of developing long-term relationships with them. In other words, retention can be defined as the commitment to continue to do business or exchange with a particular company. Thus it becomes evident that for businesses in the increasingly competitive world economy, it is highly necessary to aggressive adopt such policies and practices which satisfy their customers. In the opinion of Kotler (2000, p. 135), customer satisfaction can be defined as the level of satisfaction a customer feels depending on the way the perceived performance varies from the actual performance. This satisfaction can come out in the form of various feelings like acceptance, happiness, relief, excitement, and delight. In the opinion of Hokanson (1995), there are various factors that can affect the satisfaction of customers. They range from friendly employees, courteous employees, knowledgeable employees, helpful employees, accuracy of billing, billing timeliness, competitive pricing, service quality, good value, billing clarity, and quick service (ibid). From the analysis, it becomes evident that it is highly necessary for organisations to have proper customer service to ensure success. Also, it becomes evident that there are various factors ranging from swiftness, accuracy, and employee quality and attitude which can affect the level of customer satisfaction. Customer satisfaction and profitability In fact, the impact of customer satisfaction on profitability has been analysed by various scholars. In the opinion of Coldwell (2001, p. 195), the Growth Strategies International’s study proves that totally satisfied customers can offer 2.6 times more revenue to a company as compared to somewhat satisfied customers. The difference grows 17 times when the comparison is between a totally satisfied customer and somewhat dissatisfied customer (ibid). The explanation is that the satisfied customers are most likely to share their experience with others, and the number of such people is somewhere around five to six. On the other hand, a dissatisfied customer is likely to tell the unfortunate incident to the same amount of people. In fact, this claim is supported by the history of Morrisons (as cited in Times), the fourth largest retailer in the UK. In fact, the company was started as a family business nearly 100 years ago. However, the company, from the very beginning, stressed highly on customer satisfaction. First of all, the company has knowledgeable employees. All the butchers, fishmongers and bakers of the company have specialist knowledge in their work (ibid). Secondly, the company gives great attention to ensuring great customer service. The customer service strategy of the company is that it has the best-trained and most motivated people from the top large supermarkets. The experienced, trained, and motivated employees of Morrison provide the customers with the best degree of satisfaction (ibid). According to the company, there are four major elements of its customer service. They are information, specialist attention, after-sales service, and convenience. The term information means the information given directly to the customers by the staff, and other information published through website, packaging, catalogues, and leaflets. When all these sources provide easy to navigate information, customers tend to be more satisfied. The term ‘specialist attention’ means providing accurate information. Such help is offered when and where the customers need the same and by people who know very well the job in hand. The company offers the same through expertly trained people. The term ‘after-sales service’ refers to all areas of customer involvement once the sale has taken place. This includes packaging, guarantees, complaints, refunds, and exchanges. The last point is convenience. The term indicates that the company and its products remain easily accessible. It also includes the easiness to pay. Issues of having unsatisfied customers In fact, scholars have identified various issues associated with having dissatisfied customers. In the opinion of Hoyer and MacInnis (2001), dissatisfied customers can cause a large number of problems. First of all, they might decide to discontinue visiting the company and purchasing goods or service. Secondly, they might resort to complaining to the company about the poor service they received. In even worse cases, they will tell a third party about the poor service. In addition, they will engage in word-of-mouth negative publicity about the company. How to build customer loyalty and retention Scholars point out that simple customer satisfaction does not lead to customer loyalty. It is pointed out by scholars like Bansal and Gupta (2001, p. 23) that in order to create loyal customers, it is necessary for businesses to focus on key customer, proactively give birth to high level of customer satisfaction in each and every interaction, predict customer needs and respond to them before the issue arises, create close ties with customers, and generate a value perception. Supporting this view, Anton (1996, p. 56) claims that satisfaction is positively correlated to repurchase decisions, positive recommendations, loyalty and thus, profitability. This view has been proved by the study conducted by Evans and Berman (1997). They point out that satisfaction has the power to foster loyalty to such an extent that the customers maintain a favorable relative attitude towards the company. Also, they are likely to make positive recommendations and repurchases (ibid). However, as Kotler (2000) point out, in order to ensure that the customers remain loyal to the organisation, it is necessary for the organisation to anticipate what the customers want and act accordingly. The view is supported by Day (1994) who claims that a customer remains loyal to a firm only as far as the firm manages to anticipate the customers’ future needs. In fact, there are two perspectives of quality measurement. The first one is internal and the second one is external. The internal quality measurement refers to having zero defects and doing it right the first time. In other words, it means conformance to requirements. On the other hand, the external perspective is wider in nature. It should be measured as customer perception, customer expectation, customer satisfaction, customer attitude, customer delight and so on. In the present day business world, the external perspective has a very vital role for organisations. That is the reason why many of the scholars define service quality as the degree of discrepancy between the customers’ perceptions of service and the actual service they receive. In fact customer service and service quality have various forms in various studies. In the opinion of Hanesmark and Albinson (2004), the three components of service quality are technical, functional, and reputational. In the opinion of Hokanson (1995), the three components are interactive, physical and corporate quality. Similarly, the study by Anton (1996) identifies five components viz. corporate image, internal organisation, physical support of the service producing system, staff/customer interaction, and the level of customer satisfaction. Similar is the study by Kotler (2000) which identifies the components as performance, features, conformance, reliability, durability, service, response, aesthetics, and reputation. From all these points, it becomes more than clear that customer satisfaction is one of the most important aspects in increasing customer loyalty, retention, profitability. Also, customer satisfaction is one among the essential components of service quality. Moreover, one can identify a large number of factors to be achieved to ensure customer satisfaction. First of all, the employees should be knowledgeable about the services they offer and they should be capable of offering specialist and personalized advice to the customers. Secondly, the queries of the customers should be promptly dealt with. This is so because as studies proved, an unsatisfied customer not only turns away, but also makes many other potential customers turn away for good. Recommendations Thus, it becomes evident that the company has to do a lot to improve customer service. The first step is to offer excellent customer service. This involves offering expert and specialized advice and service during the purchase. Admittedly, such an approach will make the customers feel that they are valued. This will, in turn, increase the feeling of loyalty. Secondly, there should be a continued client-business relationship. That means the company ensures that it remains in touch the people who use the company’s products through regular services. Thirdly, there should be long term satisfaction for the customers. That means the people who purchase the service or products of a company should be not be neglected thereafter, there queries and communication should be properly dealt with as if they are a new customer. This is so because if a customer is not properly entertained, the customer will turn away, and if it happens, the dissatisfied customer will take so many people away through word-of-mouth communication. Yet another point is that the company should continue growth ad development. As a general rule, if the company concentrates more on consumer satisfaction and less on advertising, the company will be able to cut expenses considerably because a service department is more cost effective than extensive advertisements. Admittedly, one cannot ignore using advanced solutions, effective pricing and marketing techniques. The company should remain vigilant about the pricing strategy of other competitors in the market and the products should be appropriately priced. This is so because in order to gain total customer satisfaction, it is necessary to ensure that all these various elements are appropriately added. References Anton J. (1996), Customer relationship management: making hard decisions with soft numbers. Upper Saddle River: Prentice-Hall. Anderson, H & Jacobson P. (2000), “Creating loyalty: its strategic importance in your customer strategy”, in S. A Brown (ed.). Customer Relationship Management. Ontario: John Wiley. Bansal S. & Gupta G. (2001), “Building customer loyalty business-to-business commerce”, in J. N. Sheth, A. Parvatiyar & G. Shainesh, ed, Customer Relationship Management, New Delhi, Tata McGraw,-Hill, 2001. Coldwell J. (2001), “Characteristics of a good customer satisfaction survey”, in J. N. Sheth, A. Parvatiyar & G. Shainesh (Eds). Customer Relationship Management, New Delhi: Tata McGraw,-Hill, 2001. Day G. S (1994), “The capabilities of market driven organizations”. Journal of Marketing, 58(4). p. 45. Hanesmark, O. C & Albinson M. (2004), “Customer satisfaction and retention: the experiences of individual employees”. Managing Service Quality, 14(1) pp. 40-57. Hoyer W.D & MacInnis D.J (2001), Consumer Behavior. 2nd edition, Boston, Houghton Mifflin Company. Hokanson S. (1995), The deeper you analyse, the more you satisfy customer, Marketing News, 1/2, 29 (1). p16. Kotler P. (2000), Marketing Management, 10th edition. New Jersey: Prentice-Hall. The Times. 100 Business Case Studies. Developing competitive advantage through customer service, A Morrison case study. [online] Available at http://businesscasestudies.co.uk/morrisons/developing-competitive-advantage-through-customer-service/introduction.html [Accessed 24 Nov 2012]. Zairi, M. (2000), “Managing customer Dissatisfaction through effective complaint management systems”. The TQM Magazine, 12 (5) pp. 331-337. Read More